Chapter 16 summarizes the argument and shows that the methodological peculiarities of economics depend to a considerable extent on the fact that it is a social science. The fact that equilibrium theory includes a theory of rationality helps to explain why positive and normative economics are so intermingled, why economists are so strongly committed to their theory, and why they pursue a distinctive strategy.

This is a book on advice, its importance for decision making, and its influence on the evolution of conventions of behavior. The idea is simple. As societies progress, old generations of social agents die and are replaced by new ones. We are interested in what happens in this transition as the old guard instructs the new arrivals about the wisdom of their ways. Do new entrants listen to and follow the advice of their elders or dismiss it? Is intergenerational advice welfare-improving or can it be destructive? Many times wise advice is rejected only to have new generations repeat the mistakes of their parents instead of learning from them. The advice offered from one generation to the next allows for a type of social learning that leads to the creation of conventions of behavior.

This chapter sets out the methodology of the approach to behavioral economics developed in this book, emphasizing its rejection of the static “as if” approach of conventional economics and the latter’s view of rationality. It introduced the idea of a decision cycle (problem recognition, search, evaluation, choice, implementation and hindsight review), while emphasizing that how decisions are taken depends on their context. This leads to a pluralistic analysis where alternative perspectives share the idea that everything we do is based upon systems of operating rules and routines. The chapter explores the research methods of behavioral economics, including the roles of anecdotes, introspection, textual sources, questionnaires, experiments and computer simulations. Before closing by outlining the rest of the book, it introduces the evolutionary economics and evolutionary psychology perspectives that are closely related to the pre-1980 approaches to behavioral economics and kept building upon them after 1980 when behavioral economics was refashioned by Thaler with a focus on “heuristics and biases” that took the conventional approach to economic rationality as its reference point.

Equilibrium is an organising principle of economic thinking subject to incompatible interpretations. The idea of a Keynesian equilibrium as a position of rest with involuntary unemployment contrasts with Pasinetti's notion of an equilibrium situation, that is, an unstable position with full employment. In the former, an equilibrium state cannot be separated from the mechanisms that may (or may not) lead to it, whereas in the latter, the explicit separation between both layers is crucial.

This chapter explores how Pasinetti's methodological standpoint, formulation of the principle of effective demand and conceptualisation of equilibrium, cumulatively build up into a scheme of structural dynamics. It is argued that compositional changes in the structure of demand and the uneven pace of productivity increases render equilibrium situations impossible to maintain through time, especially as regards (full) employment. Therefore, rather than seeking explanations as to why the economy does not return to its equilibrium path, it proves fruitful to specify and empirically implement computable norms to quantify how far (or close) actual economies are from them, providing a compass for policy.

Cambridge economics can still be seen as a distinctive subdiscipline, involving a revival of classical and Keynesian economics and contributing to macroeconomics, to the theory of growth and distribution, to capital theory and to the history of economic thought. Pasinetti has been a major representative of this school for more than half a century. The present essay is the concluding chapter of a Festschrift for him. It provides a synthesis of the other chapters, which are dedicated to individual aspects of Pasinetti’s contributions to Cambridge economics. It leads from the methodological foundations and the theory of prices, based on production, to the theory of investment under uncertainty and to distribution, to capital theory and to growth with structural change. This is explained with Pasinetti’s normative turn. The formal conditions for the maintenance of full employment in an economy with differential rates of productivity growth in the different sectors have to be separated from the institutions, the legal and ethical rules and the historical conditions that may be required to realise full employment. The exposition is in part critical and concerns shortcomings of neoclassical approaches, and in part constructive.